One Size Does Not Fit All

The market is looking for the perfect bond market App. Maybe there should be many bond market Apps to fit the many types of bond markets.

Take a look at the chart below which summarizes Sifma data with respect to bond liquidity.

In the aggregate the bond markets turn over around 5x per year, or close to once every 2 months. But the liquidity is concentrated in just two sectors, both government-related. The average Treasury bond turns over about once per month. Pretty good! And the average Agency-backed MBS is similarly liquid, and turns over inside of 2 months.

At the opposite end of the spectrum, the average ABS transaction turns over about once every 7 years! Non-agency MBSs, if they were broken out here, would be similarly illiquid. These trade like houses!

In the middle of the pack, Munis trade on average less than once per year and Corps trade on average about once every 2 years. Even within Corps, however, liquidity is concentrated in a relatively small number of widely distributed names, and a long tail of assets rarely trades.

So when thinking about online trading solutions, with such disparate trading frequencies across markets, one size definitely does not fit all!